Macroeconomics

Difference between micro and macro?

Micro: how many computers produced in US?
Macro: how much of everything produced in US?
Measured by GDP: value of all good
Define standard of living
Infant mortality/ Life expectancy
Adult literacy
National Income
Money out there = Productive capacity
US about 15 Trillion per year
Conclusion
What is money?
Money is only a tool used to make economic exchange easier
Measure the value of something
Money has been many forms: stone, seashells, animal skins, cigarettes, precious metal,
etc.
Define value of a dollar: what we all think it should be!
Inflation: value of money goes down
Supply of money and prices goes up.
Kind of money:
Currency 1/3 (fewer) -) become data
Checking account 2/3
Saving and money market accounts (M2)
Credit card is not money
Conclusion

How did bank develop money?
Coin is inconvenient
Banks issued notes, widely accepted on banks reputation
Federal Reserve established to set up standard currency
Strength and stability of US gov
Productive value behind that money
Measure of value
Store of value medium exchange
Conclusion:

How do banks work?
Money goes to banks by depositing
Banks lend money to borrower and collect interest
Banking system and gov monitors $ as it goes
Banks cannot lend all money, must reserve some
Lend to people who cannot return -) have some money to pay
Insures $ up to 250K
Basic idea of banking
Critical in managing the sote of values of nations productive capacity
Fed regulates banks

What Fed do?
Main banks of all banks
Run by Fed of Governors
Have a chairman: Ben Bernanke
Power: manage the flow of money
Money out = productive capacity
Use monetary policy to get the right amount of money in and out: so not much
unemployment and too much inflation
Buy and sells bonds to affect interest rate
Rate high not enough money in the market
Rate low too much supply of money
Conclusion
How can I protect myself from inflation?
I have 1000 Im not spending now
Assume: __ inflation rate
Assume 10%
10% is terrible acceptable is about 2-3%
Back in 1980, inflation rate got to around 15%
Let say you save 1000 and put it under the mattress
After a year, that 1000 is not worth 1000 anymore
With 10% rate it only is worth 900
Under the mattress = 0% return
Inflation kills my money
How about putting it in the bank to get interest? Not enough since usually low
2% interest -) $920
Special account: holding for a longer time for greater interest
5% (generous) -) $950
Investment
20% -) 1100
Best investment: Yourself -) education,
Lottery
Dug, gamble, stock
Typical: house, business, real estate, stocks, bonds.commodities
You may lose money but yolo
Taxes